May 25, 2011

Supreme Court Visits Hanif: Looks As Though The Defense Is Winning

At times, it has seemed like this blog should be called "Medical Specials Recovery Blog." CBL has blogged many times on this question: "Just what does a personal injury plaintiff get when her medical bills are $200,000 but the hospitals and doctors have deals with the insurance companies, Medicaid (or MediCal as we Californians call it) or Medicare to take a whole bunch less as payment in full?" Some of the previous posts are here, here, here and here.

Well, yesterday the Cal Supremes heard argument on the question. CBL's colleague Georges Haddad attended the argument, and here, in a guest post, are his summary and tea-leaf reading:

Defendant Hamilton's truck driver crashed into Ms. Howell, causing severe spinal injuries that required treatment at two medical facilities. At each medical facility, Ms. Howell signed agreements that she would be responsible for the medical charges – standard hospital contractual language. The parties stipulated at trial that the amount of medical expenses billed was $189,824.68.

The jury awarded Ms. Howell the full stipulated amount as past medical expenses. Post trial, Hamilton moved pursuant to Hanif v. Housing Authority of Yolo County to reduce the awarded to the amount paid by Ms. Howell’s insurers - $59,537.78. Hamilton supported its motion with declarations from the two treating facilities that showed Ms. Howell no longer owed them money. The trial court granted Hamilton’s motion and reduced the award from past medical expenses to the amount paid by Ms. Howell’s insurers. The Court of Appeal upheld the trial court.

The Supreme Court framed the issues presented as follows:

(1) Is the “negotiated rate differential” – the difference between the full billed rate for medical care and the actual amount paid as negotiated between a medical provider and an insurer – a collateral source benefit under the collateral source rule, which allows plaintiff to collect that amount as economic damages, or is the plaintiff limited in economic damages to the amount the medical provider accepts as payment?

(2) Did the trial court err in this case when it permitted plaintiff to present the full billed amount of medical charges to the jury but then reduced the jury’s award of damages by the negotiated rate differential?

In answer the first questioned posed, I believe that a divided court, most like lead by Justice Kennard or Chin, will answer the question that a plaintiff is entitled to the amount the medical provider accepts as payment. As defined by the court, the “negotiated rate differential” is never incurred by the plaintiff, and therefore is not recoverable as damages

Planitiff argued that there are situations, such as with a person who is uninsured, where there is no negotiated rate available for determination and therefore the reasonable cost for the services may be examined to ensure that there is no “windfall.” Noting that no two plaintiffs are alike, counsel for the defense argued that in the case of the uninsured, the damages would still be the amount paid or accepted as satisfaction by the medical facility.

The justices seemed to agree that the collateral source rule survives the defendant's proposed approach, since judgment is not reduced by the sum contributed by a third party. When an insurer pays $50K on behalf of the plaintiff for a procedure that can cost $100K, the damage to the plaintiff is still $50K. Because the $50K was paid by the plaintiff’s insurer, it cannot be deducted from the judgment under the collateral source rule.

As to the second question, the Justices barely touched on the subject, other then Justice Corrigan, who questioned whether the case should be sent back to the trial court with instructions.